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SELECT COMMITTEE ON SUPERANNUATION AND FINANCIAL SERVICES - 13/11/2000 - Family Law Legislation Amendment (Superannuation) Bill 2000

CHAIR — I welcome everybody to today's hearing and invite Mr Bourke and Ms Turner to make a short opening statement. The committee prefers to conduct its hearings in public. However, if there are any matters which you wish to discuss with the committee in private, the committee will consider your request. The usual procedure is that the committee members will then question you. The secretariat have notified you of the time frames, et cetera?

Mr Bourke —Yes, thank you, Senator. The secretariat has notified us of the time frames. I am informed that we will be appearing before the committee for 15 minutes today and then we will return to the committee at 1.30 p.m. tomorrow. I understand this morning's 15 minutes should be spent simply in setting out the history of this project and the path that has been followed to get to this point. Then the committee may wish to hear from other witnesses, but I will be happy to take questions at the close of the opening statement.

The problem of the division of superannuation has a very lengthy history. The committee will note from submissions that the Family Court had pointed to the problem shortly after the court was established, and the case which is usually referred to is a case from 1979, the case of Crapp and Crapp. In addition to that, other examples where previous attempts have been made to grapple with this problem were recommendations made by the Law Reform Commission in its matrimonial property report in 1987. The joint select committee of this parliament in 1992 also made recommendations. The history is set out in a number of places, and I refer the committee to the government's position paper released in May 1998 which also sets out in more detail the history of the problem of grappling with the division of superannuation following marriage breakdown. Each time an attempt is made to devise a solution to the problem, the complexity of the problem seems to defeat arrival at a workable solution. The difficulties encountered typically relate to the problem of defined benefit plans.

The position paper that the government released in 1998 was entitled `Superannuation Family Law', and that paper outlined a number of proposals for the valuation of superannuation and its division following marriage breakdown. The proposals outlined in that paper were based on a concept in family law known as `community of property'. Under a community of property regime there is a presumption that all property is equally divided between the parties on a fifty-fifty basis, and the position paper set that out in relation to superannuation which was acquired either during the course of cohabitation or marriage. The submissions received on that paper supported the policy intention that superannuation interests should be divisible on marriage breakdown. However, there was a mixed reaction to the concept of the community of property regime. The difficulty that was confronted following receipt of those submissions was that the existing family law regime is not a community of property regime but a separate property regime. Therefore, before the proposals in the position paper could be implemented, the government had to ascertain whether the entire basis for the alteration of property interests would shift from a separate property regime to a community of property regime.

To explain to the committee the way a separate property regime operates, under part VIII of the Family Law Act, the fact of marriage does not create any special property rights in the partners. Each party to the marriage retains, until otherwise decided by the court or until the parties agree otherwise, whatever property he or she may have had prior to the marriage and any property acquired in separate names during the marriage. Following marriage breakdown, the court then has a discretion to alter interests in that property—that power is provided under section 79 of the Family Law Act—but it must not make any such orders unless it is just and equitable to do so. In making its orders, the court takes into account a range of factors. Those factors include the contributions, both financial and non-financial, that any spouse has made to the marriage—and that includes the acquisition, conservation and improvement of the property—as well as to the welfare of the family. In addition to that, the court determines whether a further adjustment is required having regard to factors set out under subsection (2) of section 75 of the Family Law Act. The court is required also, as far as practicable, to make an order that will end the financial relations between the parties, and that is referred to as the `clean break principle'. However, it should be noted that the court does have an overriding discretion to do justice and equity between the parties.

As I mentioned earlier, before those proposals in the position paper could be implemented, the government had to ascertain whether the basis of the alteration of property interests in family law was to shift from a separate property regime to a community property regime. To ascertain that, the government released a further discussion paper in 1999 entitled `Property and family law options for change'. The discussion paper invited comments on two different options for changing the current separate property regime. The first option was entitled `Separate property subject to reallocation', and the major difference between that option and the existing separate property regime was that it was proposed that a starting point for the distribution of property should be equal sharing based on the assumption that each party had contributed equally to the property. The second and competing option, option 2, was a community property option, and that is property which was built up during cohabitation-marriage. Under that option it was proposed that assets would be defined as communal to be those assets acquired during cohabitation-marriage by each of the parties, whether separately or in joint names, that on marriage breakdown each party would get 50 per cent of the communal assets without the need to look at the contributions made to the acquisition, conservation and improvement of the property. It was also proposed that there be an ability to depart from that fifty-fifty sharing in certain circumstances.

Neither of those options outlined in the discussion paper received community support. The majority of submissions favoured the retention of the current separate property regime. In the light of lack of support for those options, the Attorney-General decided not to proceed with either of the options but to ascertain from further research the patterns and pathways for parties following a matrimonial property settlement.

Turning now to the context of the proposals in the bill before this committee, given that a separate property regime was to be retained, adjustments had to be made to the proposals which were outlined in the position paper released in May 1998. The division of superannuation on marriage breakdown had to be consistent with the current separate property regime, so the proposals in the position paper were then redrawn in the following ways. Firstly, the reference point for determining what superannuation was within the court's jurisdiction could not be that which was accumulated during cohabitation-marriage but, as with all other property, the court would have a broad discretion over all superannuation. Secondly, the court had to be given two essential matters so that the proposals could operate successfully: firstly, jurisdiction in relation to the subject matter, superannuation; and, secondly, the power to bind third party trustees so that the court's orders could operate successfully. The legislation before this committee was drawn on that basis and is now consistent with a separate property regime.

I note that a number of submissions put to the committee on the legislation do not appear to have understood the shift from a community property regime as outlined in the position paper to what is now a separate property regime, and the committee would need to take that into account in reading the submissions. That brings me to the close of my opening remarks. We are happy to have any discussion that the committee would wish.

CHAIR —Thank you. From the feedback you have had, do you foresee any practical obstacles in terms of the execution of the proposals in the bill?

Mr Bourke —We have consulted very extensively with a number of interest groups and we have worked through a number of practical issues. The committee will hear some further issues today. What we have gleaned from those consultations is that there is broad support for the proposals in general. Some of the detail will still need to be worked through so that the practical impact of the proposals can be as minimal as possible, but in general terms I think I could say that there is broad support for the general thrust of the proposals.

CHAIR —Ms Turner?

Ms Turner —I have nothing further to add.

CHAIR —Thank you very much. You certainly put it in context. We look forward to your coming back. We will, undoubtedly, have some questions after hearing some of the other evidence. I think it was appropriate that we started with the Attorney-General's Department to give us that outline.

[9.20 a.m.]